Cunningham, Kean, Ruiz & Mazzeo Bill Would Require Court Order to Garnish Wages, Take Other Actions To Collect on Student Loans

TRENTON – Senator Sandra B. Cunningham, Senator Tom Kean Jr. and Senator M. Teresa Ruiz announced today they will introduce legislation requiring the Higher Education Student Assistance Authority to obtain a court order prior to using certain collection practices for defaulted loans under New Jersey College Loans to Assist State Students (NJCLASS) Loan Program. Assemblyman Vince Mazzeo will also introduce the bill at the General Assembly’s next quorum.

“HESAA’s policies are taking advantage of a system that has no ethical protocol,” said Senator Cunningham (D-Hudson). “We need to enact stricter procedures and we will start by requiring that the agency obtains a court order before taking certain actions. This legislation is about doing what is right and ethical, while keeping someone’s financial struggle in mind. People aren’t just skipping on payments because they want to, they are facing financial hurdles.”

Currently, the Higher Education Student Assistance Authority (HESAA) may pursue, without a court order, a variety of means to collect on a defaulted student loan made pursuant to the NJCLASS Loan Program. HESAA is unique in its enhanced ability to collect debt from borrowers. It has the ability to garnish wages, rescind state income tax refunds, revoke professional licenses and even confiscate lottery winnings, all without having to get court approval. This bill would require HESAA to obtain a court order prior to pursuing these collection efforts on a defaulted NJCLASS loan: offsetting a State income tax refund or State lottery prize winnings; initiating wage garnishment; or suspending an occupational or professional license.

“Every student should be able to pursue a college degree without being saddled with a lifetime of unmanageable debt,” Senator Kean said. “The students who testified today were just trying to build a better future. This legislation is a strong step forward in our ongoing battle to make higher education more affordable and accessible for every child across New Jersey, regardless of income or background.”

“The stories we heard today were heartbreaking. We have to put in place reasonable safeguards to ensure that borrowers are not the victims of aggressive and unfair collection tactics by the authority,” said Senator Ruiz (D-Essex). “This bill is a small, but important, step toward making sure there are checkpoints in place before specific actions are taken in collecting on a loan.”

A recent New York Times investigative report in conjunction with ProPublica detailed an agency with onerous loan terms that has employed aggressive tactics in the event borrowers were not able to make payments. The Times article profiled a mother who, despite her son’s killing, was informed by HESAA that she was not eligible for loan forgiveness. The article noted aggressive collection procedures, even causing a college graduate to declare bankruptcy at the age of 26.

The article suggests one reason for the aggressive tactics is that the state depends on Wall Street investors to finance student loans through tax-exempt bonds.

“The authority’s predatory lending practices are unacceptable and cannot be permitted to go unchecked. It is our obligation to address these problems to make sure that we do right by New Jersey’s students and hard-working families. This legislation is just one piece of the broader puzzle that will unfold in the weeks and months ahead of us,” said Assemblyman Mazzeo (D-Atlantic).